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RockShox, Inc.

RockShox, Inc.

401 Charcot Avenue
San Jose, California 95131
U.S.A.
(408) 435-7469
Fax: (408) 435-7468
Web site: http://www.rockshox.com

Public Company
Incorporated:
1989
Employees: 300
Sales: $102.2 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: RSHX
SICs: 3751 Motorcycles, Bicycles & Parts

RockShox, Inc. is the worldwide leader in the design, manufacture, and marketing of high performance suspension products for the bicycle industry, with ten front suspension forks and three rear shocks offered in 1998 under its own brand names, such as Boxxer, Deluxe, Indy, Jett, Judy, Mag, Quadra, Ruby, and SID.

Founding, 1989

RockShox, Inc. was founded by Paul Turner and Steve Simons in 1989 and incorporated in North Carolina. It was later reincorporated in California. Turner, who raced motorcycles in his teen years during the 1970s, went on to found an aftermarket engine parts company in 1977 at the age of 18. He then went to work for Honda Motor Company as their factory motocross team mechanic, an opportunity which provided Turner with experience working with the top racers in the field, as well as suspension designers and other motocross industry leaders.

Turner quickly advanced to working as a consultant for Honda, moving to northern California and there developing race engines and chassis. He also began racing in triathlons on racing bicycles and mountain bicycles. As someone who spent years riding plush suspended motocross bikes, the switch to rigid mountain bikes was difficult and Turner felt they were archaic in comparison, so he did his own modifications on a simple, lightweight motorcycle fork design which became the first generation of RockShox products. Turner went on to become vicepresident of advanced research and development for the company he started in 1989.

Entrepreneur and veteran motorcycle racer Steve Simons in 1974 designed a new shock absorber for MotoX Fox which went on to become a bestselling product in the industry. Utilizing this success, Simons went on to found his own company, Simons Inc., which developed suspension modifications and complete front forks, and obtain two patents on suspension forks, one of which he licensed to the major motorcycle and shock companies. In 1988, his spinoff company called Simons Precision became so successful in the machining industry that the original company was sold so that Steve could focus on the machine shop. In 1989, Paul Turner approached him to lend his manufacturing expertise to a bicycle suspension idea that became the genesis of RockShox. Simons agreed, becoming president of the company that year.

Also that year, Turner brought Greg Herbold aboard as test rider and company spokesperson. Herbold, known affectionately as HB, was the first downhill world champion on one of the first suspension forks ever made. That August, the company released its first 100 suspension forks, called the RSI, for shipment to the consumer marketplace.

In September 1990, the company celebrated its first World Championship Cross Country when bicycler Ned Overend won with a suspension fork. That fiscal year, the company brought in total revenues of $1.6 million on the strength of the one product they were manufacturing, the RSI.

With each evolutionary step the companys product line took, RockShox, Inc. enjoyed a corresponding increase in sales and was profitable every year from inception through at least 1996. From approximately 1984-95, the mountain bike market was the fastestgrowing segment of the worldwide bicycle industry, with manufacturers such as Cannondale Corporation, GT Bicycles, Schwinn, Huffy Corporation, Montague, and others producing the distinctive new style of bicycle. The company focused its first seven years to the highend mountain bicycle market (those retailing for $600 or more).

In September 1992, the company introduced a new adjustable hydraulic suspension component for mountain bikes called the Mag 21, which featured highpressure seals that lasted five times longer than previous seals, with a fork twice as rigid, able to handle all types of terrain. Total revenues for the year ending in March 1993 climbed to $30.5 million, with a net income of $2.7 million.

In the early to mid1990s, most mountain bikes were sold with no suspension. Many bikers went back to dealers to pick up suspension forks when they became available, giving the company a huge surge in aftermarket business. But, in the later 1990s, suspension bicycles began to have better penetration in the market, decreasing the aftermarket share. In 1993, the company released the Quadra fork which retailed for $90. In the fiscal year ending March 1994, the companys total revenue reached $37.9 million, with a net income of $4.7 million.

In September 1994, the company released the Judy XC and Judy SL forks, with their revolutionary oil cartridge suspension technology. In the fiscal year ending in March 1995, the companys total revenues dropped to $14.3 million, and a net loss of $2.3 million was posted.

In March 1995, the company received an influx of capital investment from MCIT PLC and The Jordan Company. June of that year saw the company introduce its new Deluxe product line of rear suspensions, featuring a coil over a hydraulic damper. The following month, the Super Deluxe product was released, featuring a coil over a hydraulic damper with an oil reservoir.

By the end of that year, the mountain bike fad had subsided somewhat, and the segment dropped for the first time in a decade, down from $1.6 million to $1.5 million that year, but it still continued to grow. That year, a total of 8.2 million mountain bicycles were sold worldwide through independent bicycle dealers. Of that total, the company estimated it held a 35 percent market share. Of the 2.2 million sold in the United States, RockShox Inc. held 50 percent of the market. By the end of the fiscal year ending March 1996, the companys total revenue bounced back from the previous years dismal showing, reaching $83.5 million, and the company posted a net income of $5.7 million.

In April 1996, the company introduced the Indy C product, featuring a Type 2 Spring system, targeted at the midpriced mountain bike market. May saw the Indy XC product, and June featured the Indy SL.

In July of that year, bicyclist Paola Pezzo won an Olympic Games gold medal in the firstever Olympic mountain bike event while using the companys Judy products on his bike. That month, the company also released the Coupe Deluxe product, featuring a coil over a hydraulic damper, similar to the Deluxe product.

In October the company completed its initial public offering, selling 4.8 million shares of common stock and netting approximately $64.5 million. The company began trading under the symbol RSHX on the NASDAQ stock exchange. By the following month, analysts estimated the company held 45 percent of the mountain bicycle suspension market, outselling its nearest competitor by 50 percent, and 460 of the 660 mountain bikes models available with front suspension utilized RockShox.

Roy Turner (no relation to Paul) joined RockShox in February 1997 as the Race Program Manager, working to use his broad experience in suspension technology and race team support to help the company provide teams and athletes with the best possible technical service. He started his career in professional Supercross racing as a lead technician for Team Honda in 1973, going on to become regarded as the top technician in the areas of chassis, suspension, and engine tuning. Team Kawasaki recruited him away and he quickly went from lead technician to team manager, a position he held for 12 years, where he was responsible for the development and overall success of the multimilliondollar Kawasaki professional supercross racing program.

In the fiscal year that ended in March 1997, the company had shipped over one million suspension forks, posted net sales of $106.2 million, a 27 percent increase from 1996, with a net income of $6.9 million.

Branching Out, 1997 and Beyond

Although highend mountain bikes continued to be the fastestgrowing sector of the bicycle market, the company began branching out with a myriad of new product innovations which expanded the companys reach to include midpriced mountain bikes, road bikes, and fullsuspension bikes. In April 1997, the company released the Judy S product, featuring the Elastomer Spring system of suspension. The following month, the Judy T2 was released. Also in May, the company joined five others, including telecommunications equipment manufacturer Yurie Systems Inc., as Business Weeks Hot Growth Companies of the year. In September of that year, Olympic gold medalist Paola Pezzo won his first World Championship using the companys SID cartridge/air spring suspension on his bike.

Company Perspectives:

A masterpiece is not created overnight, and it isnt just a lucky guess or the product of blood, sweat and tears. It goes deeper. True innovation is a combination of passion, education, experimentation, foresight, resources, vision, resolve, determination, experience, belief, timing, talent, insight, courage, conviction, and a little good luck. RockShox innovation is borne from a team of masters whose joint creative force is exponentially greater than the sum of its parts.

In November, the company named George Napier, former president and CEO of Meridian Sports Inc., COO of Wilson Sporting Goods Co., and a RockShox board member since January 1997, to the position of president and CEO. Napier succeeded cofounder Steve Simons, who remained as chairman and chief technical officer.

In the fiscal year that ended in March 1998, the company had again shipped over one million suspension forks, posted net sales of $102.2 million, a four percent decline from 1997, and net income posted at $5.1 million.

The mountain bike segment of the market continued to be sluggish as late as mid1998. But, by the year 2000, analysts estimated that some 9.5 million mountain bikes would be sold throughout the world, with RockShox capturing 40 percent of the worldwide market. Nearly 2.5 million of those would be in the United States, and the company hoped to hold 55 percent of the market at that time.

As the company headed into the end of the 20th century, its sales and name recognition remained strong, and it continued to struggle to contain costs and remain a powerhouse in the bicycle industry.

Further Reading

Barrett, Amy, et al, Hot Growth Companies, Business Week, May 26, 1997, p. 90.

Leventon, William, Mountain Bike Suspension Allows Easy Adjustment, Design News, July 19, 1993, p. 75.

Rockshoxlnc., Wall Street Journal, November 25, 1997, p. B11(W).

Rockshox Inc., Wall Street Journal, January 13, 1998, p. B5(W).

Thompson, T. Rockshox Inc., Merrill Lynch Capital Markets, July 31, 1998.

Daryl F. Mallett

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